If you are like me, you may have been very eager to jump into the medical marijuana and legalization stock game.
With penny stocks, that risk is ever present but the allure of the big cash out is hard to resist. I did manage to make a 10% profit from my initial investment into Medical Marijuana INC in 2013- but it was not without a few very stressful weeks where I could have been down over 60%. My experience with other pink sheet stocks allowed me to wait out the dark periods and see it through until my investment recovered.
With that said, we wanted to find some safer plays in the legalized marijuana sector?
The best picks for marijuana investments these days are to move over to the supply side of the equation. The market is going to boom over the next 2 years as more and more states come on-board with medical marijuana and industrial cannabis ventures.
The best investments on the market are those companies that are going to help farmers become more efficient.
Calgon Carbon’s stock is up over 25% year over year, much of that increase can be credited towards their award winning line of air filtration and purification products for medical pot users. The company is the pioneer in activated carbon filters. With activated carbon, since it is a porous material, it helps remove organic compounds from the air by a process known as “adsorption.” In this process, organic molecules contained in the air are attracted and bound to the surface of the pores of the activated carbon as it is passed through.
The applications for the medical marijuana industry are rather obvious but the commercial application goes well beyond at home smokers wishing to rid their homes of the smell of smoke. Edible product companies will need activated carbon filtration systems to reduce the odors in and around their manufacturing centers. Dispensaries and marijuana bars in Colorado and Washington will have to use filtration systems to keep neighboring businesses complaints to a minimum. For Calgon Carbon, the market is ripe for the taking and they would be a safe investment for those looking to minimize their risks with marijuana investing.
Another obvious supply side piece of the legal marijuana farmers is irrigation systems. While we are not suggesting that any current large scale farmers have much experience with growing marijuana, there are companies around the world that do. The majority of those all use irrigation systems in order to deliver the right amount of water and nutrients to their crops while at the same time lowering costs for water usuage. For large scale industry application, irrigation will be a no-brainer for farmers to increase their efficiency and yields per crop.
Lindsay Corporation is the leading manufacturer of agricultural irrigation systems in the world, that puts them in a unique position because their irrigation systems help twofold for marijuana farmers. First, their systems make it easier for farmers to water their crops. Second, the system helps conserve water at the same time. With more and more cities setting up water usage restrictions, any product that helps conserve water usage while not decreasing yields is going to do very well in this sector.
As an integrated fertilizer and related industrial and feed products company, the Potash Corp from Canada, is smart stock buy. The company operates in three segments: potash, phosphate and nitrogen. They own and run five potash mines in Saskatchewan and another in New Brunswick. Its phosphate operations include the manufacture and sale of solid and liquid phosphate fertilizers, phosphate feed and industrial acid, which is used in food products and industrial processes.
The key play for legal marijuana investors, is their role with in the production of nitrogen fertilizers- which is a key component in the growth phase for farmers. As of June 2014, the stock took a big hit and dipped around 45% year to date. That was after a lackluster start to 2014 but the CEO released strong fundamentals for the 3rd & 4th quarters of the year with new orders up 11% over projections and more and more large scale farming operations signing up.
Whether you want to avoid the marijuana penny stocks altogether or just diversify some of the risker picks in the industry, investing in the supply chain side of medical marijuana is a solid choice.